CREDIT ANALYSIS OF BANKS

AND NBFC
Submitted by:
Nirvika Mohan
PGDM - Finance

Company Overview
DBS Bank Ltd is a Singaporean Bank known as

Development Bank of Singapore

Set up by Government of Singapore in June 1968.
It is the largest bank in South East Asia by assets and
among largest banks In Asia.
It has market dominant position in consumer banking,
treasury and markets, asset management etc.
Named safest bank in Asia by Global Finance for six
consecutive years from 2009 to 2014.

Background of the project

Credit analysis of large private sector banks namely

HDFC Bank, ICICI Bank and Axis Bank

Credit Analysis of Tata Capital
Ratio analysis

Credit Analysis of Banks

Credit analysis is done to understand the ability of the

bank to meet its liabilities.

Seeks to understand the level of default risk associated
with investing in that entity.
CAMELS- Capital Adequacy, Asset quality,
Management Quality, Earnings, Liquidity, Sensitivity
to Market risk.

Methodology
Spreading of financial data from annual reports
Computation of relevant ratios
Preparing a camels analysis on the banks and nbfc.

Scope and Limitations

The scope of the project covered banks and nbfcs
The financial analysis was only limited to private

sector banks

Capitalization
Capitalization levels continued to remain strong with

CRAR and tier 1 ratio at 16.8% and 13.7 %

Total networth increased by 43% to USD 9.7B
Networth to weaker assets ratio remained better than
peers.
Overall we derive comfort from the banks strong
capitalization and ability to successfully raise equity
capital from the market.

Asset Quality
Banks balance sheet total assets grew by 20% in FY

2015 to USD 92.7B

Asset portfolio comprises of loans and advances
(62%), investments (28%), cash and bank balances
(5%) and others (5%)
HDFC Bank mainly focuses on retail loans which
account for 53% of the loan portfolio
Bank maintains strong credit quality as seen from their
low level of NPAs.

 Gross and Net Npa were stable at 0.93% and 0.26 %

Total investment portfolio increased by 37% to USD

26B primarily includes investments in G-secs (72.3%).

Non SLR portfolio of the bank stood at USD 7.2B and
primarily includes investments in bonds issued by
Banks and FIs (45.9%)
It can be expected that the banks asset quality will
remain better than peers on account of underwriting
standards and granular loan portfolio.

Management team
HDFC banks risk management is considered to be

good reflective of the banks financial position.

Chairman Mr. C.M Vasudev was replaced by Mrs.
Shymala Gopinath.
Senior management has shown consistency in
performance of the bank.
HDFC Bank has strong distribution network and retail
customer franchise .

Earnings profile
Total net operating income increased by 19% to USD

4.9B.
Net interest income increased by 21.2% to USD 3.5B
Operating profitability margin also increased
marginally to 1.8%
PAT increased by 20% to USD 1.6B
ROAA and ROAE in FY15 stood at 1.9% and 19.4%
respectively

Funding
Total Liabilities excluding networth increased by 18%

to USD 83B on account of deposits

CASA deposit ratio was at 44% in line with peer
average
Credit deposit ratio increased to 81.6% however was
lower than peer average
Based on ALM statement of the bank, there was no
negative funding gap.
Comfort can be derived from overall funding profile

Sensitivity to Market Risk

HDFC Bank is exposed to market risk arising from its

investment portfolio of USD 26B

A percent increase in interest rates could result in a
loss of USD 314.6 M on AFS and HFT portfolio.
Amounts to 3.2% of its networth
Total commitments and contingencies for HDFC bank
stood at USD 153B which accounts for 1.65 times of
banks total assets and 15.7 times its networth.

Conclusion
The Bank can be evaluated well based on its strong

business position, capitalization levels, good asset

quality, stable earnings and funding profile
Further it can be rated based its position as second
largest private sector bank in terms of total assets with
market share of 5% of total advances and deposits.

Efx- Scoping and Strategy

Evaluation

FX all leading independent electronic foreign

exchange platform of Thomson Reuters

Provides liquidity to active traders, asset managers,
corporate treasuries, market makers, broker dealers etc.
Offers liquidity upto one week tenor and 3 months
incase ISDA is signed with the bank

Objectives of the project

Evaluating what should be extent of marketing efforts

by DBS India Treasury sales team.

Onboard more bank clients on efx platform
To understand the FX All platform with respect to its
interface with clients.
To promote DBS as a liquidity provider on FX All
To understand the various issues and raise the same to
the head office

Scope of the project

Indian banks onshore branches
Offshore branches of the Indian banks where they are

currently not onboarded

Limitations of the project

Limited to banks only
Limited to promoting FX All platform

Methodology
Primary Research which involved telephonic survey.
Meeting Traders to understand the FX All platform
For new onboardings, liaising between clients back

office and DBS Singapore for settlement instructions.

Once the CLS settlement is in place, call vendor to get
client onboarded and transact a deal

Findings
Stale pricing
Wide bid ask quotes compared to other banks.
Rejection issues due to the minimum notional amount

or latency.
Clients want RFQ for swaps which DBS is not
providing at the moment.

Recommendations
DBS should refresh their quotes on timely basis to

avoid stale pricing.

Pricing issues should be raised to the head office as
this leads to removal from the ladder
DBS should quote for swaps on RFQ basis

Conclusion
DBS being a late entrant in the Efx space for Indian

clients needs to market itself more rigorously as a

liquidity provider.
There are many competitors in the Efx domain
therefore DBS needs to offer the best quotes to attract
more revenue.
It should try to expand clientele through other
platforms as well.